12-45
1. Describe the characteristics of intangible
assets.
2. Identify the costs to include in the initial
valuation of intangible assets.
3. Explain the procedure for amortizing
intangible assets.
4. Describe the types of intangible assets.
5. Explain the accounting issues for recording
goodwill.
LEARNING OBJECTIVES
6. Explain the accounting issues related to
intangible asset impairments.
7. Identify the conceptual issues related
to research and development costs.
8. Describe the accounting for research and
development and similar costs.
9. Indicate the presentation of intangible assets
and related items.
After studying this chapter, you should be able to:
Intangible Assets
12
12-46
Frequently results in the development of patents or copyrights such as new
product,
process,
idea,
formula,
composition, or
literary work.
Research and development RD costs
are not in themselves intangible assets.
LO 7
12-47
Companies spend considerable sums on
research and development
.
LO 7
ILLUSTRATION 12-12
RD Outlays, as a Percentage of Sales
12-48
Research costs must be expensed as incurred.
Development costs may or may not be expensed as incurred.
Capitalization begins when the project is far enough along in the process such that the economic benefits of the RD
project will flow to the company the project is economically viable.
LO 7
12-49
Identifying R D Activities
Research Activities
Original and planned investigation undertaken with the prospect of gaining
new scientific or technical knowledge and understanding.
Examples
Laboratory research aimed at discovery of new knowledge; searching for applications of
new research findings.
Development Activities
Application of research findings or other knowledge to a plan or design for the
production of new or substantially improved materials, devices, products,
processes, systems, or services before the start of commercial production or
use.
Examples
Conceptual formulation and design of possible product or process alternatives;
construction of prototypes and operation of pilot plants.
LO 7
ILLUSTRATION 12-13
Research Activities versus Development Activities
12-50
Research and development investments are the lifeblood of product and process developments that lead to future cash flows and growth. Countries around the world
understand this and as a result provide significant incentives in the form of tax credits, “superdeductions” deductions greater than 100, and corporate tax rate reductions, including
“patent box” rates for companies that own and use patents registered in that country. Here is a summary for seven major economies.
GLOBAL RD INCENTIVES
Source: L. Cutler, D. Sayuk, and Camille Shoff, “Global RD Incentives Compared
,” Journal of
Accountancy June 2013.
LO 7
12-51
1. Describe the characteristics of intangible
assets.
2. Identify the costs to include in the initial
valuation of intangible assets.
3. Explain the procedure for amortizing
intangible assets.
4. Describe the types of intangible assets.
5. Explain the accounting issues for recording
goodwill.
LEARNING OBJECTIVES
6. Explain the accounting issues related to
intangible asset impairments.
7. Identify the conceptual issues related to
research and development costs.
8. Describe the accounting for research
